Hiring Biased Managers: Kant vs. Nash

Jen-Yao Lee; Leonard F.S. Wang; Di Wu

doi:10.1515/bejeap-2024-0444

Article

Hiring Biased Managers: Kant vs. Nash

Jen-Yao Lee , Leonard F.S. Wang and Di Wu

Published/Copyright: September 8, 2025

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From the journal The B.E. Journal of Economic Analysis & Policy

Abstract

This paper investigates how firm owners select biased managers under different competition modes with Kantian Optimization principle. We show that in both Cournot competition and Bertrand competition, the optimal strategy under Kantian optimization is to hire relatively conservative managers. This stands in contrast to the findings under Nash optimization, where owners optimally choose relatively aggressive managers. Additionally, we demonstrate that the cross effect of a rival firm’s managerial type on a firm’s expected market size does not influence the owner’s optimal choice of manager type.

Keywords: Kantian principle; biased manager; Cournot competition; Bertrand competition

JEL Classification: D43; L21; L22

Corresponding author: Di Wu, Institute of International Economics, School of Economics, Nankai University, # 94 Weijin Road, Nankai Zone, Tianjin 330071, China, E-mail: woody998@163.com

Funding source: MOE Project of Key Research Institute of Humanities and Social Scences

Award Identifier / Grant number: 22JJD790039

Funding source: The National Natural Science Foundation of China

Award Identifier / Grant number: 72303121

Acknowledgments

We are grateful to the editor-in-chief, Till Requate, and the anonymous referees for their helpful comments and constructive suggestions. All authors contributed equally and are listed in alphabetical order, and they should be regarded as joint first authors.

Research funding: This work was supported by MOE Project of Key Research Institute of Humanities and Social Sciences (22JJD790039) and The National Natural Science Foundation of China (72303121).

Appendix

Proof of inequality (11):

π C K − π C N = a − c 2 4 1 + γ − 2 a − c 2 2 − γ 2 4 + 2 − γ γ 2 = a − c 2 γ 2 2 + γ 2 4 1 + γ 4 + 2 − γ γ 2 > 0

Proof of inequality (18):

π B K − π B N = a − c 2 4 1 + γ − a − c 2 2 − γ 2 γ 2 1 + γ 4 4 − 2 − γ γ 1 + γ 2 = 2 a − c 2 1 − γ 2 − γ 2 1 + γ 4 − γ 2 − γ 1 + γ 2 > 0

Proof of inequality (24):

π ̄ C K − π ̄ C N = a − c 2 4 1 + γ − a − c 2 1 − γ 2 + γ 2 η 2 + γ 2 2 + γ η − 1 2 2 + γ η − γ 2 2 = a − c 2 γ 2 2 + γ 2 1 − 2 η 2 4 1 + γ γ 2 − 2 2 + γ η 2 > 0

Proof of inequality (28):

π ̄ B K − π ̄ B N = a − c 2 4 1 + γ − a − c 2 1 − γ 2 η − γ 3 − γ 2 1 − η 2 − γ 1 + γ η − γ 1 + γ γ 4 − γ − γ 2 − 2 2 − γ 1 + γ η 2 = a − c 2 2 − γ 2 γ 2 1 + γ 1 − 2 η 2 4 2 2 − γ 1 + γ η − γ 4 − γ − γ 2 2 > 0

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Received: 2024-12-09

Accepted: 2025-08-24

Published Online: 2025-09-08

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https://doi.org/10.1515/bejeap-2024-0444

Keywords for this article

Kantian principle; biased manager; Cournot competition; Bertrand competition